Futures are higher to 4022. Despite the large price range on Friday there was little change to open interest, or implied volatility, which leaves key SG levels unchanged.
Resistance for today is at 4000 – 4010 (SPY 400). Support lies at 3950-3060(SPY395).
We continue to anticipate the core theme of upside calls coming for sale into rallies >=4000, as seen last week. The 3/31 expiration 4065 JPM collar call remains our max upside level to watch into Friday. Barring headline risk, IV is elevated enough to provide a decent vanna tailwind here, which could support markets into the positive gamma strike area around 4000.
The 390 SPY/3900 SPX & 400/4000 strikes continue to show as the largest gamma strikes, as the market rotated in this range throughout last week.
Despite the test of weekly 3900 area lows on Friday, we did not see much in the way of put positions added – nor did we see any material change in longer dated IV.
What we did see was very heavy 0DTE SPX volume, as Friday was one of the largest 0DTE days on record. We recorded >50% of total volume, and 1.5mm contracts (which are “top 5” marks). Note here how in the previous few weeks 0DTE reduced which correlates to the bank crisis, FOMC, etc.
This 0DTE flow remains to be long buyers in AM, as 0DTE call buyers seem particularly heavy into weak market openings. This can bee seen here in the composite S&P500 HIRO signal, as 0DTE bought the dip, and unwound those positions as the S&P pulled up into 4000 territory. We speculate that much of this 0DTE call buying on lows is traders delta hedging core long put positions.
Coinciding with this 0DTE spike, we saw a contraction in short dated IV (i.e. this weeks), as shown below. The idea here seems to be that while “investors” sort through the ramifications of the banking crisis, the tail risk has been pushed back, and therefore traders/speculators may be popping their heads back out.
In summary, our strongest view remains that of resistance around 4000 for today into tomorrow, and 4065 into Friday. Dealers are likely long gamma in this area, which suggests that volatility should contract sharply if the 4000 level is breached. As realized volatility reduces, implied can be sold which further tightens trading ranges.
To the downside, while moves lower seems to be fairly fluid and jumpy, traders seem content to buy dips in the 3900-3950 range, and/or sell short dated implied volatility. This leads to mean reversion back into the 4000 area, where traders have been sellers (yellow zone in the map below, posted on 3/21).
The wrong headline could quickly change this dynamic, and we continue to mark 3900 as the line wherein mean reversion “breaks”, and flow becomes one-way (lower), and IV could increase materially.
|SpotGamma Proprietary SPX Levels||Latest Data||SPX Previous||SPY||NDX||QQQ|
|SG Implied 1-Day Move:||1.16%,||(±pts): 46.0||VIX 1 Day Impl. Move:1.37%|
|SG Implied 5-Day Move:||3.01%||3970 (Monday Reference Price)||Range: 3851.0 | 4091.0|
|SpotGamma Gamma Index™:||-0.34||-0.89||-0.33||0.03||-0.01|
|SpotGamma Absolute Gamma Strike:||4000||4000||400||12525||300|
|Gamma Notional (MM):||-231.0||-269.0||-1486.0||5.0||-27.0|
|Additional Key Levels||Latest Data||Previous||SPY||NDX||QQQ|
|Zero Gamma Level:||4008||4008||404.0||11664.0||340|
|Delta Neutral Px:||3967|
|25 Day Risk Reversal:||-0.05||-0.06||-0.05||-0.05||-0.05|
|Call Open Interest:||5,296,159||5,327,296||6,312,704||51,014||4,485,868|
|Put Open Interest:||10,315,540||10,475,875||12,915,397||53,990||8,073,543|
|Key Support & Resistance Strikes:|
|SPX: [4100, 4000, 3950, 3900]|
|SPY: [400, 395, 390, 385]|
|QQQ: [320, 310, 305, 300]|
|NDX: [14000, 13000, 12525, 12000]|
|SPX Combo (Strike, Percentile): [(4150.0, 83.27), (4098.0, 90.56), (4074.0, 89.22), (4066.0, 95.31), (4058.0, 78.46), (4050.0, 90.82), (4031.0, 85.74), (4027.0, 76.68), (3951.0, 91.99), (3915.0, 89.94), (3900.0, 95.4), (3876.0, 78.0), (3864.0, 84.91), (3852.0, 93.06), (3824.0, 82.22), (3812.0, 81.38), (3800.0, 97.2)]|
|SPY Combo: [378.73, 388.63, 405.25, 383.88, 393.77]|
|NDX Combo: [13137.0, 12524.0, 12933.0, 12320.0, 13342.0]|